Thursday, November 29, 2012

Being extraordinary is a terrific bother, truth be told, so please appreciate the benefits of ordinariness if you are so blessed.

Every hour of every day, we are persuaded that the benefits of being extraordinary in some way are equally extraordinary. This has two propaganda components:

1. If you buy this product or service (touted by An Extraordinary Person), you will feel the vicarious thrill of acting/looking like you're extraordinary.

2. Our society is a meritocracy, blah blah blah; if you are naturally talented/bright and if you make extraordinary efforts, you might rise above mere ordinary and start accruing all those fabulous benefits reserved for the extraordinary.

What if these benefits aren't as wonderful as advertised? That would hurt sales and the drive of those who bought into the meritocracy claim.

Let's start with those glorified twins, fame and fortune. Fame is actually a huge bother. You have to be polite to strangers or risk your sour rejection of fans being spread over the Web in short order. You find that acclaim wears thin very quickly on multiple levels: any comment might be taken out of context and used to undermine your claim to extraordinariness, and your human foibles are trumpeted as weaknesses.

People seek some sort of ethical-spiritual perfection in the famous, as if being extraordinary in some field automatically elevates a person to sainthood.

The demands made on your time and attention cannot possibly be met; all the world's a stage, and you are constantly "on." While the morbidly insecure come to depend on this diet of public adoration, those with any shred of inner security soon find the whole "fame thing" tiresome.

As for fortune: your focus shifts from reveling in wealth to worrying about protecting it. The average person has a "wish list" of stuff they would buy with a fortune: fancy autos, homes, tropical islands, etc. But all of these properties require maintenance, and so you become a manager--unless you hire a manager, which then opens you up to being ripped off or defrauded. (The list of actors, sports celebrities and rock stars whose wealth has vanished in dubious "investments" and outright fraud is long indeed.)

After you've spent whatever can be spent, then you have to concern yourself with capital preservation, and in this volatile world that is a major source of anxiety. No wonder so many lottery winners end up broke a few years after their big windfall: the constant appeals for cash and the hassles of managing wealth become too much, and squandering it is the only way to return to a sane, less anxious life.

Or your $300 million dwindles to $5 million, and the loss deranges you to the point you shoot disruptive neighbors or otherwise snap. Many a dot-com millionaire is haunted by what they didn't do with their brief but glorious wealth.

Now for the benefits of being ordinary. The temptations to stray are few for the ordinary; those of us with ordinary looks, brains, talent and wealth are not beset with the temptations of impossibly beautiful women/handsome men, nor do dealers approach us with offers of cocaine or other costly illegal substances. No one is willing to give themselves to us for access to our power, because we have no power beyond that residing in our bodies and souls.

Lacking power and prestige, we are not tempted to lie to protect our power and prestige.

Since everything we own is also ordinary, there isn't much worth stealing (except if we own older-model Japanese cars that are worth more in parts than as whole vehicles), so ordinary security measures are sufficient.

As ordinary people, nobody expects extraordinary results or behaviors from us. Expectations of us are also ordinary, which means that good work and politeness will go a long way to meet or exceed expectations.

The extraordinary, unfortunately, are constantly beset by expectations that are impossible to consistently meet. For example, if you are a top concert pianist, critics will be listening for any slight weakness in your performance, not just compared to others but to your past performances.

If a money manager generates extraordinary returns one year, he is expected to meet or best that return the following year, and so on, until he quits or expires.

Your very extraordinariness becomes a liability or a weapon used against you.

Trying to do extraordinary things is often dangerous, for example, snowboarding Denali. Mistakes can cost you your life at this level. Even in "safe" endeavors, any failure is potentially sufficient to ruin your career.

Thus academics without tenure must obsess over backstabbing rivals in the department or the "graduate student from Hell" whose parent happens to be a powerful, well-connected dean at a top university.

Those seeking extraordinary standing, position, accomplishment, recognition or returns are exposed to soul-numbing burdens and pressures as those chasing the same rarefied position will stop at nothing to undermine you or increase their chances by lowering yours.

The ordinary have no such worries. We tend to have jobs nobody wants badly enough to plot against us.

The extraordinary must maintain high internal standards that sap the joy from life. Music loses its fun-factor when your internal standards are necessarily performance-level. If nothing less than the corner office and a partnership will do, then life becomes a vacuous treadmill of overwork and anxiety about falling short.

The ordinary have far fewer such worries. Music remains a joy because advancement from a low level is rewarding, and the freedom from impossible job pressures is true freedom.

As you may have noticed, I am ordinary/average in every way, with the one exception being the quantity of words I disgorge on an annual basis. I am not sure this is something to brag about, as it may well be evidence of an unhealthy imbalance somewhere in my jumbled mind.

Otherwise I am blissfully ordinary in all other things: wealth (modest), looks (ditto), power (none), athletic ability (near-zero), musical ability (ditto), talent at learning foreign languages (ditto), stock trading ability (sub-average, constantly beaten by a monkey throwing darts), spiritual attainment (none), author (minimal sales) and so on. Everything I own is also ordinary, and the best thing I own (the Les Paul guitar) is just a production model--nothing custom, rare or fancy.

Being extraordinary is a terrific bother, truth be told, so please appreciate the benefits of ordinariness if you are so blessed.

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization2. Crony capitalism and the elimination of accountability3. Diminishing returns4. Centralization5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

I recently highlighted one historical example of a PSM (Previously Successful Model) in Our Dust Bowl Economy (November 20, 2012): in the ample-rain era of the 1920s, farmers in the semi-arid southern Midwest had reaped huge profits by plowing up and planting fragile native grasslands.

They poured their profits into homesteads, equipment and more land to enable further expansion.

When grain surpluses pushed prices down, their "model" had only one "solution": plant more land and harvest even more grain to compensate for lower prices. When prices fell from $1 per bushel to $.25/bushel, the model collapsed.

This previously successful model exacerbated the Dust Bowl and left the trapped farmers with no alternative but to either keep trying to make a failed model work or leave and abandon all their sunk capital in land, homes and farm equipment.

A more current example can be found in Microsoft (MSFT a.k.a. Mister Softee), whose previously successful model took a 42% marketshare in smartphones and reduced it to 2%. Here is an excerpt from Microsoft has failed (semiaccurate.com):

Microsoft has three product lines that underpin everything, Windows, Windows Server, and Windows Mobile. On those, the other moneymakers, Office and Exchange, run exclusively. The apps use protocols that are locked down with dubious methods, and will not run on any competition. The competition is likewise excluded from doing what Microsoft can, either directly like Novell, or by raising the cost to the point of it not being profitable. This is how the wagons are circled, with every iteration, the cost of competing go up, and value of alternatives go up too.

The problem is that if you are locked in with a choice of 100% Microsoft or 0% Microsoft, once someone goes, it isn't a baby step, they are gone. Once you start using Google Docs and the related suites, you have no need for Office. That means you, or likely your company, saves several hundred dollars a head. No need for Office means no need for Exchange. No need for Exchange means no need for Windows Server. No need for Office means no need for Windows. Once the snowball starts rolling, it picks up speed a frightening pace. And that is where we are. The barriers to exit are now even more potent barriers to entry.

Microsoft bought Nokia to both kill off one competitor and to buy their market share. Microsoft at the time had approximately 12% smartphone OS marketshare, Nokia a bit over 30%. With the collaboration, Nokia and Microsoft, together with all the other OS partners selling Windows Phone 7.x, sales are now hovering around 2% of smartphone market share.

Microsoft's mobile aspirations have failed so spectacularly that it is almost impossible to account for. Rather than fix the lock in that excludes the overwhelming majority of the market that does not have a Windows phone, Microsoft doubled down with the new iteration playing the same compatibility games they did before to lock out developers, competitors, and innovators.

The death spiral for Microsoft is in full effect, and management is expending a lot of effort to speed it up. Microsoft is unwilling to change, and that is very clear. Even if they wanted to, they are culturally far beyond the point of being able to. What was a slow bleed of marketshare is now gushing, and management is clueless, intransigent, and myopic. Game over, the thrashing will continue for a bit, but it won't change the outcome. Microsoft has failed.

I would generalize that the Microsoft model of buying competitors and stitching together quasi-monopolies has failed: first in mobile, next in tablets and eventually in operating systems and Office.

We see the immense power of previously successful models. Straying from the previously successful trajectory looks needlessly risky, even as the trajectory has rolled over and is heading for unpleasant impact.

Anyone who questions the previously successful model (PSM) is suppressed, fired or sent to Siberia as a "threat" to the enterprise's success. Anyone who realizes the Titanic will inevitably sink and abandons ship leaves behind all their sunk capital: they leave with the figurative clothes on their back.

Since most of the systems and fiefdoms that are trapped in previously successful models are bureaucracies, we can also profitably use the "Supernova" model of rapid expansion, brief equilibrium and sudden collapse: The Lifecycle of Bureaucracy (December 2, 2010):

I have often addressed the way that bureaucracies arise to solve a problem and quickly progress to becoming an even bigger and more intractable problem themselves, generally because they only know how to expand (the ratchet effect) and have no institutional ability to shrink or become more efficient:

We can also visualize PSMs (Previously Successful Models) as a rising wedge, a pattern well-known to technical analysis. The previously successful model essentially charts an expansionary course that the organization is locked into. As the model fails to produce results, inefficiencies and costs rise, pushing the lower boundary of failure ever closer to the actual revenues.

Once the revenues fall below this threshold of viability, the organization breaks down, as there is no organizational capacity to radically reduce costs and headcount while significantly increasing efficiency and return on investment.

This model of breakdown describes all the major systems of local and Federal Government: the Pentagon, Medicare, Medicaid, Social Security, the higher-education/student loan cartel, the mortgage/housing cartel, sickcare, and so on.

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization2. Crony capitalism and the elimination of accountability3. Diminishing returns4. Centralization5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Tuesday, November 27, 2012

The Grand Bargain is unraveling, and a new arrangement will take the place of the Status Quo--whether we like it or not.

Correspondent Arnold suggested that I address the fiscal cliff, so here goes.

The first step is to set aside ideological blinders and confirmation bias, i.e. only looking for data that supports our current beliefs.

The second step is to look at the foundation of everything: household income.Household income is the foundation of taxes paid, consumption (spending) and savings/investment. If household income is declining, that means the pie of money that can be divided up into taxes paid, consumption and investment is shrinking.

If taxes go up, there is less pie left for spending or investment. And since the economy ultimately depends on private-sector spending and investment, then reducing those to fund government spending means there will be less private spending and investment.

If the government spent the taxes on investments that yielded a higher return than private investments, higher taxes would not devastate the economy. But the problem is that there are no feedbacks on government spending that favor efficiency or high yields.

Government spending decisions are made solely on the basis of constituency pain:the constituencies that create the most political pain for politicos and Upper-Caste government bureaucrats get funding. Efficiency and high-yielding investments are not in the political equation at all; there is no feedback in monopolies except those that favor expansion of budgets and constituencies.

Here is another chart depicting the huge gap between nominal income and real income:while nominal income rose a seemingly healthy 25% since 2000, real income has declined almost 10%.

Median income doesn't tell us who is getting most of the income, so let's look at this: All the increases in income since 1970 accrued to the top 10%.

But we have to remember that median income includes all income, including the wealthy. Real income has declined by 8%-9%. The pie is smaller, period.

Some of that is due to a declining full-time workforce, which has dropped to 115 million workers:

Now let's look at the size of government spending and taxation. In terms of the overall economy (GDP), government spending's share of the economy has been rising for decades. The Internet and housing bubbles briefly "grew" the economy faster than government spending, but once these one-off expansions faded, government spending quickly returned to its trendline (ever higher).

Federal spending rose exponentially until it exceeded the carrying capacity of the economy. For context, recall that Social Security costs $817 billion, Medicare and Medicaid costs total about $800 billion annually, and the Pentagon/National Security budget is around $690 billion. Add in interest on the ballooning national debt, and the vast majority of the Federal budget goes to these four. You could eliminate all other Federal spending and these four consume all the tax revenues and then some.

OK, so now we see why government spending can't keep following an exponential path higher: households are earning less income.

Next up: the welfare/cartel State. Some welfare flows directly to individuals ("transfer payments") and some flows to cartels: defense, sickcare, the education cartels, etc.

The problem here is the number of citizens who are dependent on government transfers and spending now exceeds the number of full-time workers. Recall (see chart above) there are 115 million full-time workers in the U.S.

100 million wage earners, or 2/3 the entire workforce, earn less than $40,000 per year.

In practical terms, only the 115 million full-time workers pay significant taxes, and of those, The top 25% (those earning more than $66,193) paid 87% of the taxes. The bottom 50% of taxpayers, roughly 70 million people, earned 13% of the income and paid 2% of the income taxes collected.

(The top 1% of taxpayers reported almost 17% of all taxable income and paid 37% of all income taxes. The top 5% reported 32% of all income and paid 59% of the taxes, and the top 10% earned 43% of the income and paid 70% of the taxes. Where Do You Rank as a Taxpayer?)

The top 1/2th of 1% owns most of the productive assets of the nation and most of its machinery of governance (this is the "half class"). Most of the income not siphoned off by this "we own the important stuff" class goes to the next 19.5% who pay most of the Federal taxes (class #1).

Class #2 is the dwindling "middle class" (also known as the working poor) which receives no government transfers and lives off earned income. This is perhaps 30% of the households.

Class #3 is the lower 50% who depend on transfers, subsidies, etc. because they are retired, don't make enough at their jobs to support their families or are disabled (legitimately or otherwise).

The Grand Bargain was this: we at the top will pay significant taxes as long as we get to control the levers of financial and political power. We in the top 19% will pay much of the taxes as long as we and our children can continue to live well and accumulate wealth. We in the "middle class" will continue to work hard as long as we have hope of bettering our lifestyle and the lives of our children. We in the bottom 50% and retirees agree not to threaten the top .5%'s power and the wealth of the top 19% as long as we can get by on our government transfers.

This Grand Bargain is now fraying as the promises made to everyone cannot possibly be met. Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs. The triple-whammy is the upper-middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their net worth.

That which is unsustainable will be replaced by another more sustainable arrangement. Everyone who slips off their ideological/self-interest blinders knows the Status Quo is unsustainable, and so everyone in the 3.5 classes is shifting nervously: will I get taxed to the point of "uncle" or will my bennies get slashed?

By heavily taxing earned income, the system extracts the highest taxes from the most productive citizens, leaving the less-productive with essentially no income taxes and the super-wealthy with the huge tax break offered to capital gains and other unearned income.

In essence, this is a vote-buying scheme by the Status Quo: the top .5% control the policies of the State in alliance with the State's own Elites, and together they buy the complicity of the bottom 50% to passively accept their dominance.

In other words, the bottom 50% pay relatively modest taxes or are recipients of Central State aid and the top .5% who "own" the political process limit their taxes by favoring unearned income (what they collect from sales of securities, stock options, rents, etc.). Thus the productive quintile (top wage earners) pay the highest tax rates and most of the taxes.

It's a partnership of "Tyranny of the Majority" and "entrenched incumbents Elites."If the political Status Quo alienates the majority by making them pay more taxes, they risk losing power in the next election. If they alienate the top .5% who fund their multi-million-dollar campaigns, then they will also lose power. So they heap the tax burden on what remains of the upper-middle class.

When that 20% rebels, falters or opts out, the system collapses for want of tax revenues. Not coincidentally, that happens to fit the Pareto Distribution: the 20% "vital few" exert outsized influence on the 80%.

The Grand Bargain is unraveling, and a new arrangement will take the place of the Status Quo--whether we like it or not.

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization2. Crony capitalism and the elimination of accountability3. Diminishing returns4. Centralization5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Monday, November 26, 2012

Those with vested interests in the Status Quo tout data that supports the claim the "recovery" is now "self-sustaining," meaning that the economy is now expanding fast enough to fuel new growth. In this view, the Federal Reserve's extraordinary policy interventions (zero interest rate policy, $23 trillion in support provided to the global banking system, 3.4% mortgage rates, etc.) and the Federal government's unprecedented fiscal stimulus (borrow and blow $1.3 trillion a year) have done their job; the economy is now "self-sustaining," meaning that it can continue growing as Federal deficits shrink and the Fed trims its quantitative easing policies.

The data favored by the Status Quo interests are GDP (which rises when the government borrows and blows trillions of dollars), housing sales (still low compared to 2006, but better than 2011) and consumer confidence, which is hitting multi-year highs. Consumer confidence is a quasi-quantitative measure of the critical "animal spirits" that Keynesians look for to drive more borrowing and spending: if you feel wealthier for whatever reason, that confidence arouses your "animal spirits" to rush out and buy something, preferably a house and a car.

Those looking at fundamentals such as household income/debt and sales see more of a Mind Trick being played on the weak-minded. If you can convince me the economy is expanding and inflation is rising, I will be more likely to risk borrowing and spending more than I can afford. The "real" economy might be sputtering, but my belief in the "recovery" will support my confidence in the wisdom of leveraging more of my (shrinking) income into debt-based consumption.

This debt-based consumption (according to the Keynesian Cargo Cult) will spark so much "growth" that the expansion will become self-sustaining. Corporations will see the rise in sales and become confident enough to make capital investments and hire more workers, who will then spend their paychecks consuming more stuff, and so on.

So the task of the Status Quo shifts from actually expanding the economy to persuading us the economy is expanding. If the Mind Trick works, then maybe the unleashed "animal spirits" will actually spur real-economy growth.

It appears a certain number of buyers are convinced housing has bottomed, and this confidence (misplaced or not, no one yet knows) has persuaded them to buy real estate. This has indeed fueled a self-sustaining growth cycle in some areas, as people waiting for the bottom are jumping in, pushing prices higher and drawing in more converts.

On the other hand, if household incomes continue weakening, then the confidence of all those real estate investors in rising rents and 100% occupancy might not align with reality as well as they anticipate.

All debt and consumption is based on income. Consider these charts:

Notice that the only age bracket with rising incomes is the 65 and over cohort; everyone younger than 65 has seen their income slashed.

As I have observed many times before, the middle class filled this gap between rising costs and stagnating wages with debt.

Income for every age group other than 65+ seniors has declined sharply:

The income of those in their peak earning years 45-54 have been slammed:

With debt levels still high and income sagging, where is the higher income needed to support higher debt and spending? Lowering the interest rate has enabled higher debt, but now that interest rates are negative (below the rate of inflation),they can't go any lower: the Status Quo has run out of "stimulus" and now must rely on manipulation and artifice--Mind Tricks--to persuade people a stumbling, stagnant economy is growing robustly enough that they should risk their future prosperity on debt-based consumption in the present.

Self-sustaining recovery or Mind Trick? We may not know for some time if the Mind Trick worked or not, but the real economy could rise up and shatter the illusion at any time.

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization2. Crony capitalism and the elimination of accountability3. Diminishing returns4. Centralization5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Sunday, November 25, 2012

My Mom, bless her heart, drove a stake through the guilt-ridden, retail-riot needless-gift Christmas madness: "Let's not exchange gifts this year--none of us need more stuff or calories." Done! We are having a gift-free party, where the "gifts" will be the experience of conviviality and the memories.

No matter how "small" the gifts may be, the guilt-soaked onus to buy something, anything for everyone in the family/enterprise is deranging. What most households need is not more stuff but someone to haul stuff away.

We as a nation are awash in stuff. Dumpsters are crammed with perfectly good food (an estimated 40% of food in America is thrown out), perfectly good electronics, still usable furniture, and on and on.

As for candy, confections, cakes, etc.--as Mom said, none of us need more sugar-fat calories. If we do give sweets this year, they will be homemade so we can use real ingredients and cut the sugar used in the recipe. We can also trim the portion sizes. Less is better in so many ways.

Well guess what, America--if your economy is based on buying useless stuff on credit, then it should collapse, and the sooner the better, because there is another, better way to live: without credit, and without needless stuff.

In a largely loveless, technology-distracted, burned-out society, then the guilt of self-absorbed emotional miserliness drives us to salvage an expression of caring from a needless gift. Too busy to actually listen to your kids? Lavish them with a gift. Ditto your parents, colleagues, etc.

If time is the ultimate gift, then what better gift than time spent together enjoying a home-cooked meal or other conviviality?

Yes, children expect multiple gifts, even if their rooms are already warehouses of consumerism, and a gift may be expected in certain business settings. But is there no other way to express caring than a frantically purchased retail-riot gift? How about sharing some item that is somebody else's surplus? This is now a business model: yerdle - why shop when you can share?"Sharing is more fun than shopping."

If you are in a position of responsibility, then how about ending the gift-exchange charade in your enterprise/division? Or if you face a full-blown rebellion in the family or company, then why not place a $5 limit on all gifts? Or require the gifts be home-made, or consumable?

If you must give gifts, then how about making them useful tools? This is the idea behind our list of practical kitchen tools: Favorite Practical Kitchen Tools (All Under $23, many under $10, most made in U.S.A.): if you feel you must give a gift, or want to help stock a new household's kitchen, then for goodness sakes, give something that is useful on a daily basis, not an electric pasta maker (or equivalent) that collects dust in a closet until the owner moves or has a garage/jumble sale.

Yes, we will give a few gifts to children, friends and key clients; but the gifts will be small, handmade or consumable. It's time we freed ourselves from needless stuff, needless calories, needless spending, needless guilt and needless derangement.

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization2. Crony capitalism and the elimination of accountability3. Diminishing returns4. Centralization5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Saturday, November 24, 2012

The risk he was taking by moving Ross in without Alexia's permission suddenly struck him as absolutely foolhardy, and Robin thought, You did this hoping to impress Kylie and win her gratitude; what if she's unimpressed, and Alexia finds out? Then what?
Heaving a sigh, he bent down to pet Hanover the cat and then murmured out loud, "I'll have to tell her--but what if she says no?" I can move Ross into my place, he realized, and then I can sleep at Alexia's; she wouldn't be so hard-hearted as to refuse me that favor. After all, I'm practically housesitting for her anyway.
Hoping the move wouldn't completely disrupt his tightly scheduled day—if I'm done by mid-morning, I should squeeze every client in, he calculated—he made himself a cup of Sumatran coffee—a free sample, of course—and then set off for Berkeley in his minivan.
As traffic slowed to a crawl on the Bay Bridge, Robin decided to grasp the nettle and call Alexia. Conjuring up his most persuasive sales voice, he clicked the phone button and awaited Alexia's voice with uncommon anxiety.
"Something's come up," he began. "I have an emergency, and I need to ask you for that big favor you promised me." As Alexia listened, he laid out a most heartstring-plucking tale of woe: a good friend had just been burned out of his house and desperately needs a place to stay for a few days while he finds a new apartment; could I put him up in your spare bedroom?
It seemed like a much weightier favor than Alexia had expected—or perhaps she'd reckoned their sofa time had already paid off the promised favor—and in response Robin added, "I'd put him up but you know how small my studio is."
"Why don't you use my spare bedroom, and let him stay in your place?"
"That would work," Robin replied, though he was less than overjoyed by the thought of Robin cluttering his tidy studio. And there was a nightmare scenario to consider: what if Ross didn't leave? An ugly scene might alienate Kylie—and impressing her positively had been the entire point of offering Ross temporary refuge.
"What's your friend's name?"
Alexia's question sent an electric shock of alarm up Robin's spine, and in a fevered brainstorm of necessity came upon Ross's initials. "He goes by R.T."
"I always distrust men who go by their initials," Alexia remarked. "It's just a bit too 'good-ole-boy'."
"Well, he doesn't like his first name," Robin said defensively.
Alexia had already moved past the inconsequence of his erstwhile guest's name to caution. "Just make sure he doesn't touch anything if he goes upstairs with you."
"Of course," Robin reassured her, and Alexia asked, "How is Hanover?"
"Perfectly happy," Robin replied, and Alexia sighed. "Lucky you. My friend's dog seems listless and out of sorts."
"You know how pets feel when their masters are away," Robin remarked. "I better go now—I'm on the bridge. Thanks for permission to use your spare room."
Clearly unhappy with the favor just granted, Alexia grudgingly acknowledged his gratitude and then rang off.
Feeling his generous impulse had already swerved him into a ditch even before Ross set foot in his studio, Robin hoped his plea for Kylie's forgiveness went better than his plea to Alexia.
Pulling up at the curb, Robin got out and was surprised to see Kylie emerge from the rooming house door dressed in a dark blue jacket and tight-fitting matching skirt. In black heels and with her hair tied back in a severe ponytail, she cut a very corporate figure, and with a disappointed sigh Robin realized she would not be helping with the move.
Kylie seemed to hesitate when she saw him, and Robin's heart beat out a nervous rhythm of worry.
"Hi," she said, and her nervousness seemed equal to his. "How's the shoulder?"
"Better," she replied coolly. "I'm sorry I can't you move Ross, but I have an interview this morning—I got the call a half-hour ago."
Robin nodded in disappointment and she added in a rush, "I have something to tell you about last night."
"Me, too," he interjected, and she gave him a look which melded dread and hope into one.
"I think we should forget about last night," she said firmly, "and just go back to dating—I mean, if you still want to see me."
"I understand," he said perhaps too quickly, and then rushed into his own now-muddled speech. "I just wanted to apologize for the confusion—I mean for taking advantage of the confusion."
"You didn't," she replied dismissively. "The confusion was all mine."
"I didn't exactly clear it up," he murmured, but she did not relax her stiff pose.
"It wasn't my typical second date," she said wryly, and her initial hope drained away. He didn't say he wanted to see me, she thought; he just wanted to apologize. Just what I thought; it's over.
I'm losing her, he fretted, and desperate not to let the conversation end on such a soul-deadening note he said, "Nor mine. You promised me lunch on Wednesday—shall I meet you somewhere in Berkeley, or do you want to come to the City?"
He's just being polite, Kylie told herself; that's what they all say, and then they cancel at the last minute and never call again. "Here, I guess," she replied noncommittally.
"Good," he said with visible relief. "I'll call you that morning to confirm."
You mean to cancel, and that's the last I'll hear from you, she thought, and with a great effort she offered him a wan, lopsided smile. "Thanks for helping Ross," she murmured, and Robin wanted very badly to say, I'm doing it for you, but he did not, for it seemed too calculated and theatric.
"Good luck with the interview," Robin said, and though he tried to smile, its half-hearted nature was all too visible. She doesn't want to see me any more, he thought; she knows I took advantage of her, and here's my payment: it's over.
Though inwardly crushed, Robin carried on in a bravely conversational manner. "We should have him moved over by noon; it's Friday, so he'll have the weekend to get sorted out."
Kylie nodded, and her voice was carefully toneless. "It's very kind of you to help. I'm sorry, but I have to go."
Robin gave her a small wave that expressed his sense of utter defeat, and watched her derriere sway as she hurried down the sidewalk to her rust-streaked car. This is how Nirvana turns into Hell, he sighed; suddenly alive to the need for one last-ditch effort, he shouted after her, “It was our third date.”
Kylie slipped behind the wheel of her old Dodge and thought, I'll show up for the interview a complete mess. If only I hadn't kissed him, and . . . oh, forget it. It's done, chalk it up to experience. But why does experience always have to be so bitter?
Just when Robin reckoned his spirits could not sink any lower, Ross burst out of the door, revealing the unfortunate truth that Robin's spirits could indeed plumb far lower depths.

To be able to assemble such a diversity of nationalities and ethnicities is an astounding sort of wealth that remains uncommon. You can "buy" the presence of an international group of people but you cannot "buy" a gathering that arose from caring, generosity and love.

Here is a partial list of the menu. I think there was one store-bought dessert someone brought; everything else was handmade and often extraordinary for reasons I explain below. There were a number of vegetarians in the group so an effort was made to provide a spectrum of non-meat dishes.

It is all too easy to give a rote nod to the freedom and abundance that enable such a feast. The same can be said of the rude health needed to enjoy it. If we explore these foundations a bit deeper, we are forced to question the nature of wealth.

After this gathering, I realized true wealth is mastery freely shared. If this sounds obscure, it is not intended to be so, any more than saying "wealth that seeks only to expand wealth is not true wealth."

I will try to explain. We were fortunate to have two international chefs interning at Chez Panisse join our celebration, as my wife had befriended one via email before her arrival in California.

Chez Panisse is unique in the world of restaurants, not for the quality of its cuisine (there are hundreds of restaurants serving up "fine dining" for a hefty price around the world) but for the immensity and reach of its influence. It is no understatement to say that it is undoubtedly the most influential restaurant in the U.S. and perhaps the world.

This is the result of an integrated philosophy of using locally produced ingredients and preparing them with artful sincerity, i.e. "simply" but with authority, authenticity and with an eye on presentation. The effect is intentionally informal rather than "fancy."

I will illustrate with an example from yesterday. Our flat is small, perhaps 800 square feet, and our kitchen is equivalently small. We had to combine two households (our friend/neighbor and our own) of tables, chairs and dishes to host 23 people, and we used her oven and our propane-fired burner outside to augment our overworked stove.

There were already about six people crammed into the small kitchen, and the two chefs immediately found a tiny length of counter to start work. One magically located my favorite old Japanese knife (given to me by correspondent Ishabaka), and I was pleased to note she set her own knife aside to use this one.

This chef quickly assembled the sort of fresh greens with accents (pomegranate seeds, etc.) that would grace the cover of Saveur, while I apologized to the other chef for asking her to do the lowly tasks of preparing the mashed potatoes and gravy. Rather than be offended by our request, she cheerfully set about making extraordinary mashed potatoes and gravy.

This is true mastery: there is no small thing done badly. This is in keeping with the Chez Panisse philosophy, which aims not for some artificial heights of exclusivity but mastery of creative use of fresh ingredients in artful "simplicity." This is not well understood, I think, in a culture saturated with "celebrity chef" TV shows.

No small thing done badly. In the usual "fancy meal," the mashed potatoes and gravy would be ignored or dressed up in some sort of exotica. Here, the chef kept to "simple" mashed potatoes and gravy, but did so with full mastery.

As I said, our flat is small and old, and our kitchen is small and old. Despite these limitations, it is a well-stocked kitchen because we cook a lot, and the chef's ease in locating all the tools of their trade was a gratifying compliment. I watched in amazement as they seemed to already know where to find whisks, cast-iron pans, etc. in our crowded kitchen.

Both loved the Manchurian Gobi (cauliflower) prepared with equal mastery by our young friends, and my wife's "Buddha's feast." Mastery is not a brand, nor is it exclusive. It is not perfection, it is the pursuit of mastery that counts.

Wealth is mastery freely shared. Someone with plentiful money (paper, gold, whatever) could "buy" each dish at a restaurant or order their private chef to prepare it, but they could not "buy" such a gathering because the caring and generosity at its heart is not buyable at any price.

True wealth is what cannot be bought. There are of course exceptions, but I personally do not know anyone with a showy mansion who has any real friends or who entertains out of love rather than for show. They may have a multitude of acquaintances and associates, but no real friends, for friendship cannot be bought, and the nurturing of friendship lies on a completely different path than the acquisition of "wealth."

Any number of financial "gurus" constantly boast about flying between dog-and-pony shows for people with too much money who don't know what to do with their money, as if carving out a giant carbon footprint as a lapdog of the "wealthy" and squandering one's life in airports and airliners is admirable rather than merely foolish. What is presented as "wealth" is in fact a sad form of extreme poverty.

Anyone with a bit of money can buy a ticket and sit in an airport. There is no trick to that. The trick is having the world come to you, and that is a "wealth" that cannot be purchased. You can "buy" servitude but you cannot buy caring, generosity or love.

It is only as a participant that one can enjoy freely shared mastery. Someone with abundant money can sit down and passively consume a masterfully prepared dish, but passive consumption can never "taste" mastery, much less understand it as the pure expression of pleasure.

I had difficulty sleeping, for the experience of witnessing mastery, and participating in the process, was deeply moving. Our young friends had slept over the previous night to help us prepare for the celebration, and afterward the young man told us that he had observed everyone was smiling as they ate. There is no "price" on mastery freely shared, on generosity, on caring, on companionship or on friendship and affection.

"Wealth" of the monetary kind is an illusory "wealth," a cheap chimera of meaningless consumption, a desperate shadowplay put on for others. Wealth is mastery freely shared.

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization2. Crony capitalism and the elimination of accountability3. Diminishing returns4. Centralization5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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